Financial Crime News is publishing a comprehensive 200 plus page Threat Assessment on the United States. To download the 200 page plus FCN USA Financial Crime Threat Assessment 2022 See: HERE: FCNUSA_06_09_22_PBD
For a Summary 5 page USA Financial Crime Dashboard by FCN See: HERE. For an OPED (Opinion & Editorial) on the USA fight against Financial Crime based on the research and analysis carried out in this comprehensive Threat Assessment 2022 by FCN See: HERE. For an analysis of whether the US should be considered as a High Risk Country See: HERE.
The USA is faced with threats the size and scale of which very few other countries face.
The US is a major source, transit and destination for illicit funds and as confirmed by the US Treasury Secretary Janet Yellon (December 2021) & the US State Department (INCSR 2021) is also a major money laundering hub.
1. KEY THREATS
Unwanted firsts or leading threats are:
- Number 1 source for arms trafficking which supports and heavily arms organised crime and drug trafficking organisations in Mexico and the Northern Triangle (El Salvador, Honduras & Nicaragua), which has made this region and the Caribbean a much more violent and dangerous place.
- Number 1 destination for human smuggling from the Americas, not least as a result of the conditions created by arms trafficking as set out above. Human Smuggling proceeds estimated at between US$3.7-US$4.2 billion (2016) including from Mexico and between US$200 million and US$2.3 billion (2017) from the Northern Triangle region of Central America—Guatemala, Honduras, and El Salvador, with individual costs estimates ranging from US$4,000 to US$12,000 per individual per trip (less from Mexico – more from further afield). it is estimated that 370,000 Central American migrants attempted to enter the US (2016), but only 11% successfully made it through, with the rest interdicted by either US (56%) or Mexican authorities (33%).
- Additionally that 50% to 75% of migrants smuggled have to pay drug trafficking transnational organised crime organisations for passage through areas controlled by them and these payment figures ranged from US$300 to US$700, which could generate about USD30 – USD180 million in 2017.
- Number 1 destination for illicit drugs, with 10.7 million people with illegal drug use disorders (an increase of 91% between 1990 and 2019), representing 3.7% of the population (an increase of 62% between 1990 and 2019), much greater than the world average (0.94%). 100,306 drug overdose deaths during the 12-month period ending in April 2021, with overdose deaths from opioids increasing to 75,673, up from 56,064 the year before. Synthetic opioids (other than methadone) are currently the main driver of drug overdoses. 23 million Americans are in recovery from addiction including from drugs. Proceeds from drug trafficking has been estimated at US$64 – US$150 billion. Drug seizures whilst substantive, make little difference to the overall US illicit drugs market with enough supply to meet an increasing demand.
- Number 1 destination for fake goods, with US$1.3 billion in seizures (MRSP) in the US coming (by value) from China (50.5%), Hong Kong (32.8%), Turkey (2.4%), Vietnam (2%) & South Korea (1.9%) of watches & jewellery (33%), handbags & wallets (22%), consumer electronics (12%), wearing apparel/accessories (12%). Main modes of transport were express (flight) (45%), mail (7%), cargo (containers etc) (35%). Trade in fake goods is estimated globally at 3.3% of GDP – if applied to US imports of US$2.6 trillion (2019) it would generate US$86 billion.
- Number 1 target for fraudsters, and the fastest growing crime including those using cyber means. Fraud proceeds at US$415 billion – including US government fraud of US$148 billion (healthcare & social security fraud), insurance fraud of US$308 billion & others including consumer fraud at US$5.6 billion – of which US$2.3 billion is due to imposter scams, while online shopping accounted for about US$392 million & card fraud at US$10.6 billion. The FBI’s Recovery Asset Team in 2011 assisted in freezing over US$328 million in funds for victims who were directed by criminals to make transfers to U.S. accounts under fraudulent pretences. COVID 19 relief program frauds are estimated at more than USD100 billion, with California estimating fraudulent losses of at least USD11 billion and perhaps even as high as USD30 billion, or 27% of the CARES Act spending.
- Number 1 target for cybercriminals with nearly 108 million Americans experienced some form of attempted cybercrime, and more than 719 million hours were lost with Americans spending an average of almost 7 hours to resolve the issues created. Synthetic identity theft is the fastest growing financial crime in the US. It also targets the most vulnerable citizens. The FBI received nearly 850,000 reports in 2021. and reported losses reached US$6.9 billion. Older Americans bore the brunt of the financial hit. Estimates of reported proceeds in 2021 for cybercrime (US$6.9 billion), was made up of, business e mail compromise (BEC) at US$2.4 billion, confidence scams at US$956 million in victim losses & cryptocurrency losses which grew to US$1.6 billion in 2020, but with asset freezing of US$328 million.
- Number 1 destination for imports of at risk products tied to human trafficking/forced labor estimated at USD144 billion out of an estimated USD354 billion imported by G20 countries (laptops, computers & mobile phones, garments, fish, cocoa, sugarcane). Estimates of victims of human trafficking vary but could be as high as 420,000 or 1.3 victims per 1,000 people, making the USA the largest market in absolute terms in the Americas, & 18th globally. The government response is rated highly as “BBB”. As far as proceeds from domestic human trafficking is concerned estimated proceeds are: US$6.5 billion, with US$4.3 billion from sexual exploitation, US$1.8 billion from forced labor and US$500 million from domestic servitude.
- 6th Worse score of G7 countries for corruption (ahead of just Italy), with a negative trend over the last 5 years & only 7th best out of 19 of G20 countries (not including EU as the 20th), with 7% of those surveyed in the US reported having paid a bribe & 64% think the US government is run by a few big interests looking out for themselves. Those sectors considered most corrupt (based on a scale 1–5, where 1 means not at all corrupt, 5 means extremely corrupt) were: Political Parties (4.1), US Congress (3.7%), Public Official / Civil Servants (3.6), Business / Private Sector (3.6%), Media (3.5%), Judicial system (3.3), Medical & Health (3.3), Police (3.3), Education system (3,1%), Religious Bodies (3.1), NGOs (3%), Military (2.9%). Costs of Corruption in the US estimated at between US$210 billion – US$1 trillion with values of bribes of US$21 billion.
- Number 1 in private financing of elections, with amounts paid by so called “Super PACs” in the 2012 Presidential election at US$600 million rising to over US$1 billion spent in 2016 & in the 2010 midterm elections for congress, less than US$100 million was spent which rose to more than US$300 million in 2014 and over US$800 million in 2018. US opinion is overwhelmingly in favour of US election (campaign) finance reform whether its Democrats or Republicans polled. In 2010 the US Supreme Court ruled in Citizens United v. Federal Election Commission that companies and labor unions enjoy the same right to political speech as individuals. With this decision, many restrictions on money in American politics were undercut. Subsequently, so-called super PACs – political action committees that are financed in part by large corporations, their multibillionaire shareholders, or powerful unions – can pour hundreds of millions of dollars into political campaigns, as long as their efforts are independent of candidates. To many, the influx of large sums of money into American politics, puts corporate interests first, and results in corruption. Some even go so far as to claim that corruption has been effectively legalised and enshrined in the system. This probably why campaign finance reformers, politicians, and academics alike have been arguing for decades that large sums of money imperils US democracy.
- Number 1 in the value of proceeds from acquisitive crime at more than US$70 billion including from cargo theft at US$35 billion, organised retail theft at US$30-37 billion, vehicle theft at US$7.4 billion, precious metals & stones theft at US$838 million & cash at US$1.25 billion. Organised theft is a mainstay of organised crime.
- Number 2 in terms of gun deaths after Brazil, (in absolute terms – 20th in the world in per capita terms), with more mass shootings than anywhere else in the world.
- Number 1 when it comes to incarceration with prison numbers over 6.3 million, with 2.1 million in prison (compared to 200,000 in 1970) and 4.4 million under community surveillance on probation or on parole, disproportionately affecting the poor and people of colour. Over 19 million Americans living with felony convictions and approximately 70-100 million with criminal records.
- Largest loss of life in a single terrorist attack, which saw more than 3,000 killed on 9th September, 2001, in a single day, since the battle of Antietam on September 17th 1862, which recorded 3,650 dead (2,100 Union troops; 1,550 Confederate troops) in the American Civil War. Whilst the 9/11 Attack on America was carried out by Al Qaeda, a foreign terrorist organisation, & the Islamist terrorist threat remains, domestic terrorism is in the rise with so called home grown white supremacists, with ready access to funds and weapons and considered the most significant terrorist threat at “home”. The recent increases in domestic terrorism began around 2014. From 2014 to 2021, there have been an average of 31 fatalities per year from so called domestic terrorism – indicating that 30 deaths in 2021 are typical of this period. This is substantially more than the period from 1994 to 2013, during which there were only three years in which more than 8 individuals were killed in terrorist attacks in the United States.
- Number 1 for the highest tax gap with tax evasion by individuals at least at US$37 billion (2021) but the tax gap could be as high as US$441 billion , or US$700 billion or US$1 trillion a year, according to the US government. The US is estimated to be inflicting at least USD20 billion on 3rd countries by facilitating tax abuse, and by enabling global private tax evasion, through its offshore financial services.
Threats have been identified by US authorities and prioritised since 2021 as follows:
Whilst the US National Priorities (NPs) cover many crime types, they include human trafficking & human smuggling as one NP (albeit they are not the same and whilst they have some overlap in some cases should be seen as separate crimes. Moreover as the NPs include Transnational Organised Crime (TOC), a number of crimes that aren’t identified as NPs may also be relevant. Wildlife Trafficking is also specifically included in the National Money Laundering Risk Assessment 2022 (NMLRA) as a special focus. recognising its recent increase in importance and attention.
The National Priorities include many of the predicate crimes that are estimated to generate the largest financial crime proceeds, though not all, for example, Fake goods and acquisitive crimes such as theft, robberies and burglaries, but also the largest of all being tax evasion (see above).
2. KEY VULNERABILITIES
According to the NMLRA 2022:
- “Criminals continue to use a wide range of money laundering techniques to move and conceal illicit proceeds and promote criminal activity depending on availability and convenience. The US continues to face both persistent and emerging money laundering risks related to 1) the continuing misuse of legal entities, 2) the lack of transparency in certain real estate transactions, 3) complicit merchants & professionals that misuse their positions or businesses; & 4) pockets of weaknesses in compliance or supervision at some regulators US FIs.”
- The main vulnerabilities and risk were from: Cash (Bulk Cash Smuggling, Postal Money Orders, Funnel accounts, Cash Intensive Businesses); Misuse of Legal Entities (Status of BO Requirements, Shell and Shelf Companies & Trusts); Virtual Assets (VASP Registration and Compliance Obligations & Anonymity-Enhanced Cryptocurrencies and Service Providers); Complicit merchants and Professionals (Merchants, Attorneys, Real Estate Professionals,& Financial Services Employees); Compliance deficiencies (Banks, MSBs, Securities Broker-Dealers, &Casinos); Luxury and High-Value Goods (Real Estate, Precious Metals, Stones and Jewels & Art Industry; Entities not subject to comprehensive AML/CFT requirements (Investment Advisers and Private Investment Vehicles, Third Party Payment Processors, & Non-Federally Chartered Puerto Rican Financial Entities).
3. FATF RESULTS FROM THE 2016 REVIEW & 2020 FOLLOW UP REPORT
Overall, FATF found that “The AML/CFT framework in the U.S. is well developed & robust & that the understanding of ML & TF risks is well-supported by a variety of ongoing and complementary risk assessment processes.
The FATF 2016 MER (after Follow Up Report in 2020) ratings for Technical Compliance with 40 Recommendations: 9 “Compliant” ratings, 21 “Largely Compliant”, 6 “Partially Compliant”, and 4 “Non Compliant”. On Effectiveness, the USA received 4 “High”, 4 “Substantial”, 2 “Moderate” & 1 “Low”.
The 6 Recommendations of “Partially Compliant” ratings in 2016 were for R1(RBA), R10 (CDD), R12 (PEPs), R16 (Wire Transfers), R20 (STRs), and R25 (Transparency & BO of Legal Arrangements. The “Moderately Effective” ratings were for IO3 (Supervision) & IO4 (Preventative Measures).
The 4 “Non Compliant” ratings were for: R22 (DNFPBs CDD), R23 (DNFPBs Other Measures), R24 (Transparency & BO of Legal Persons) & R28 (DNFPBs Supervision). The Effectiveness ratings for IO5 (Legal Persons & Arrangements), was rated “Low Effectiveness“.
The poor results in these areas were described in more detail in the FATF 2106 Report as follows:
- The regulatory framework has some significant gaps, including minimal coverage of certain institutions and businesses (investment advisers (IAs), lawyers, accountants, real estate agents, trust and company service providers (other than trust companies). Minimal measures are imposed on designated non-financial businesses and professions (DNFBPs), other than casinos and dealers in precious metals and stones, and consist of the general obligation applying to all trades and businesses to report transactions (or a series of transactions) involving more than USD 10 000 in cash, and targeted financial sanctions (TFS) requirements. Other comprehensive AML/CFT obligations do not apply to these sectors. In the U.S. context the vulnerability of these minimally covered DNFBP sectors is significant, considering the many examples identified by the national risk assessment process; &
- Lack of timely access to adequate, accurate and current beneficial ownership (BO) information remains one of the fundamental gaps in the U.S. context. The NMLRA identifies examples of legal persons being abused for ML, in particular, through the use of complex structures to hide ownership. While authorities did provide case examples of successful investigations in these areas, challenges in ensuring timely access to and availability of BO information more generally raises significant concerns, bearing in mind risk and context;
Based on a simple scoring model, the US scores 63/100 for Technical Compliance with the 40 Recommendations & 67/100 for Effectiveness with the 11 Immediate Outcomes.
The US is the only country whose “effectiveness” score is higher than its score for “technical compliance” ranked 3rd equal for effectiveness with important actions to further improve on corporate transparency and DNFPBs (“Enablers”).
4. Key USA RISK & RESILIENCE INDICATORS
5. FI & OTHER’S FINES & PENALTIES
Since 2000, there have been 44 material (over US$10 million) US levied AML fines amounting to US$11.8 billion & 18 levied AML fines (non-US) amounting to US$9.6 billion against FIs. US fines represent 55% of total AML related fines, followed by Malaysia (22%) Australia & Netherlands (7% each), UK (5%), Sweden (2.5%), Hong Kong (1.6%) & Germany (0.1%), with USA 55% Asia 31% & Europe 15%.
In the same period, there were also 21 material (over US$10 million) US levied sanctions fines amounting to US$16.8 billion -1 levied sanction fine in the UK (US fines represent 99.9% of total sanctions related fines, followed by UK (US$27 million)
Whilst 2008 is often seen as the start of the modern era of foreign corruption enforcement actions by US authorises (with the Siemens case), recent years have seen new heights in fines and penalties, for example in 2019 (US$2.66 billion in corporate penalties on 21 enforcement actions) and 2020 (US$2.79 billion in corporate penalties on 16 enforcement actions) before falling back in 2021 – (US$259.5 million on 6 enforcement actions).
6. MONEY LAUNDERING CASES/OFFENDERS
Whether due to its economic size, population, wealth, levels and breadth of international trade and its importance as both a financial centre as well as the US dollar as a global currency, the US is a money laundering centre, with hundreds of billions of dollars in financial crimes generated domestically each year. Foreign illicit funds destined for the US to invest in its currency, its securities markets or real estate, or as a transit country, for example trade via correspondent banking, the US is most likely the most exposed country to illicit finance and money laundering.
In December, 2021, US Treasury Secretary Janet Yellen at the Washington DC Summit for Democracy, stated that, “in the popular imagination, the money laundering capitals of the world are small countries with histories of loose and secretive financial laws. But there’s a good argument that, right now, the best place to hide and launder ill gotten gains is actually the United States.”
According to the US Dept of State Money Laundering assessment (INCSR Vol 2) published in March 2022, the US categorised itself as a “Major Money Laundering Country” along with 80 other Countries.
According to the FATF Report 2016, “The U.S. achieves over 1,200 ML convictions per year on average at the Federal level, which encompasses prosecutions in all 50 States and U.S. territories. Federal authorities prioritise large value, high impact cases, which often occur in the largest States such as California, Florida, New York, and Texas. Money laundering is investigated and prosecuted by Federal authorities.”
By 2021, 831 cases involved money laundering, down by 23.5% since 2017. According to the US Sentencing Commission, “The average conviction rate is just under 60%, although rates vary across agencies. For example, around 80% of prosecutions derived from IRS investigations result in conviction and sentences of imprisonment. In many instances, during the plea negotiation process, the ML charge is dropped which in part explains why the number of persons charged is so much greater than the number of persons convicted”.
Offender characteristics include:
- 79.6% of money laundering offenders were men – Hispanic (36.5%), White (31.3%), & Black (24.1%). 8.1% were Other races.
- The average age was 41 years old.
- 71.3% were United States citizens & 70.4% had little or no prior criminal history.
- The median loss for these offences was US$293,359.
- 16.1% involved loss amounts of US$40,000 or less & 23.5% involved loss amounts greater than US$1.5 million.
- Top five districts for money laundering offenders prosecuted were: – Southern District of New York (52); – Southern District of Florida (45); – Northern District of Texas (39); – Southern District of California (34); – Southern District of Texas (33), and
- The average sentence for money laundering offenders was 69 months, with 90.5% sentenced to prison.
7. FEDERAL ASSET RECOVERY
The Asset Forfeiture Program (AFP) encompasses the seizure and forfeiture of assets that represent the proceeds of, or were used to facilitate federal crimes, according to the DOJ. Deposits of US$4,299 billion in 2012, benefited from US$2.2 billion in Madoff related fines and in 2014 benefited from US$1.8 billion from JP Morgan/Madoff fines. In 2020 deposits benefited from US$539 million from IMDB related fines/forfeitures. In 2021 deposits were US$1.4 billion. On average, large deposit levels (that weren’t one off fines) are around US$1 billion a year from 2012-2021, and average annual deposits at US$2.258 billion.
According to research, the “total forfeited between 2000 & 2018 was at least US$68.8 billion, including over US$23 billion under state law and almost $46 billion under federal law. In 2018 alone, the year for which data is available (from 42 states, 1 D.C. and the federal government) forfeited over US$3 billion. Of that, US$500 million was forfeited under state law and US$2.5 billion under federal law through DOJ’s and Treasury’s forfeiture programs.”
The NMLRA 2022 reported that, “as of 2021, the DOJ’s Kleptocracy Asset Recovery Initiative had recovered and assisted in recovering and repatriating approximately US$1.7 billion in assets and had an additional approximately US$2.2 billion in assets restrained pending forfeiture litigation and forfeited pending return negotiations.”
8. LAW & ORDER
According to available information, the US is one of a handful of countries that spends more than 2% of GDP on law & order/public order & safety (2.01% of GDP in 2016), albeit down from 2.18% in 2011. This would represent approximately US$400 billion in 2020. The USA’s spending on law and order is less than Russia at 2.26%, (from a % of GDP perspective) but exceeds (for example) the UK at 1.78%, Australia at 1.75%, France at 1.63%, and Germany at 1.55% (all 2016). That said a large part of the budget goes on courts and prisons, which is consistent with having the largest incarceration rate in the world. (see above). According to the Urban Institute, “In 2019, state and local governments spent US$123 billion on police (4% of state and local direct general expenditures), US$82 billion on corrections (3%), and US$50 billion on courts (2%)”l
President Biden announced new plans in July 2022 to tackle crime in a – “Safer America Plan” proposing a US$37 billion increase with US$13 billion over the next five years to hire and train an additional 100,000 police officers.
9. FINANCIAL INTELLIGENCE
From 1996: SARs in their current form were introduced in the US on April 1st 1996. In their first year, FinCEN received 68,733 SARs, from 19,000 reporting (financial) institutions of which approximately 330 from non-depository institutions, such as broker-dealers & MSBs). Approximately half of the SARs reported came from just 5 of 53 States or Territories (California 23%, New York 12%, Florida 8%, Texas 7%, Arizona 4%).
Of particular note was that approximately 22% of SAR filings (18 months from April 96 – end October 97) had come after the reporting institution had made direct contact with law enforcement officials in connection with the case, perhaps in recognition that these cases were highly suspicious and not simply routine, and/or a continuation of prior years practice were reports were made to law enforcement before FinCEN became the central reporting body.
How useful the SARs reported were to law enforcement can be revealed by data produced by FinCEN. In the 18 months from April 96 – end October 97, SAR filings related to 391 FinCEN cases, which in half of the cases, the case file had been opened before the SAR was submitted (that is, a suspect named in a SAR filing was already the subject of an enforcement or regulatory inquiry), with the remaining cases probably results of SAR filings which led investigators to request additional information from FinCEN. These 391 cases, where SARs are likely useful, compare to other work of FinCEN which supports law enforcement with financial analysis in approximately 6,800 cases each year.
SAR filing numbers have increased from 1996 exponentially, from 68,787 in the first year to 281,373 in 2002.
From 2001: Following the Attacks on America in 2001, and the passing of the USA Patriot Act, SAR filings began to rise significantly (507,217 in 2003; 689,414 in 2004; 919,230 in 2005; 1,078,894 in 2006,1,250,439 in 2007, 1,318,984 – 2008; 1,321,848 – 2009, 1,319.984 -2010). SARs exceeded 2 million in 2017 & 3 million in 2021.
In 2017/18: FinCEN produced 5,000 alerts (rule findings) a month that are generated from its searches of new data coming into the FinCEN database. The searches are carried out using 65 (out of 95 approved) rules (including watch list names to detection scenarios made up of business rules) focussed on 6 priority areas: transnational security threats, cybercrime, transnational organised crime, significant fraud, compromised FIs or third party money laundering, and anomaly detection). The 65 rules are tested when initiated and every 6 months to ensure they are operating within acceptable standards, which include not capturing too much data or false positives.
The 5,000 alerts a month (or rule findings) are passed to those FinCEN employees in the Intelligence Unit to analyse, and from which to produce financial intelligence for both FinCEN and its stakeholders from primarily the US law enforcement community.
Based on 74 intelligence officers (see below figures using 2018 as a benchmark), each officer would process and analyse 3.5 alerts (rule findings) each working day. To review hands on all of the 2.1 million SARs in 2018 (3 million plus SARs a year in 2021), that would translate into 28,378 SARs for each officer or approximately 110 each working day.
FinCEN receives CTRs as well as SARs and stores all of these in its database, and estimated (2018) receiving around 55,000 reports a day. The database is open to be queried by over 10,000 users, primarily in the US law enforcement community.
In testimony to US Congress in May 2018:
- LEA (and other) requests for supporting information in the FinCEN database, for example suspicions transactions, ran (in 2017) at 1,882 or 7.2 per day.
- Incoming requests for information received by FinCEN from Foreign Egmont FIUs (2017) was 1,017 (3.9 per day) with so-called spontaneous requests for information at 1,142 (4.4 per day).
- S.314 (a) requests to FinCEN from US LEAs at 396 (1.5 per day).
- Outgoing requests for information sent by FinCEN to Foreign Egmont FIUs (2017) was 413 (1.6 per day)
2019: FinCEN Director Ken Blanco was keen to explain how useful the SAR database was. In 2019 he confirmed that, “12,000 agents, analysts and investigative personnel from over 350 unique federal, state, local and tribal agencies across the US had direct access to the SARs, held by FinCEN. Each day approximately 30,000 searches were carried out. Furthermore there are more than 100 SAR review teams and financial crimes task forces across the country bringing together prosecutors and investigators from different agencies to review BSA Reports. Collectively these teams reviewed approx 60% of all SARs filed. Annual queries average 7.4 million, which generates approx 18.2 million filings that are responsive or useful to ongoing investigations, examinations, victim identification, analysis, network development, sanctions development, and US national security activities, among many many other users that help protect our nation, deter crime, and save lives.” Recognising that many are sceptical about the value of such extensive reporting to FinCEN, not least due to the tens of billions of dollars in costs to generate BSA reports, FinCEN initiated the “BSA Value Project” which was intended to track and measure the value of BSA reporting including SARs and to be more transparent and communicate their results.
2020: A year into the “BSA Value Project”, FinCEN provided an update which included that 1 in 4 FBI & IRS – CI investigations use BSA data. For some crimes its higher. For example, 60% of FBI investigations into organised crime use BSA data and 20% of FBIs international terrorism investigations use BSA data. The IRS-CI report that 24% of its investigations into criminal tax, money laundering, and other BSA violations are directly initiated by or associated with, a BSA report.
In 2021: There was no update on the BSA Value Project, but SARs filed in 2021 continued to rise and for the first time exceeded 3 million. Data on these SARs reveal that:
- 3,069,453 SARs, reported an increase of 564,942 SARs or 22.5% on 2020.
- Approx 25% of the SARs reported came from just 5 of 53 States or Territories (Top 9 all over 50,000 SARs are from California 8%, New York 5%, Ohio 4.6%, North Carolina 4%, Texas 3.6%, Virginia 3.4%, Florida 3%, Delaware 2.6%, Illinois 1.7%)
- Lowest numbers of SARs outside (overseas islands) from US States from Wyoming (1,152) and Vermont (1,504), Alaska (2,404), North Dakota (2,626), Montana (2,705) & New Hampshire (3,897).
- SARs from Depositary Institutions by product (over 10,000): FIs Deposit accounts (1,017,854), debit cards (369,294), credit cards (109,972), others (101,414) & prepaid access (28,796).
- SARs by Supervised Agency: OCC FIs (845,337), NCUA (217,786), FDIC (201,968), FED (157,865) & IRS (3,783).
- SARs by Payment Type: Funds Transfer (737,347), US Currency (526,918), Personal/Business Check (324,365), Government Payments (121,087) & Others (105,744).
- SARs by suspicious activity categories (SARs): money laundering (1,414,516), other suspicious activity (1,260,521), fraud (971,783), structuring (496,441), ID documentation (110,665), cyber (27,026), mortgage fraud (8,805), securities & futures (1,536), gaming (672), Terrorism Finance (324), Insurance (TBC).
- Where depositary institutions filed most at 46.5% of all SARs, with MSBs at 37%, Other FIs 12%, securities firms at 2% & casinos & card clubs at 1.8%
10. FINCEN RESOURCES
FinCEN staffing in December 1997 was around 162 with approximately 50 involved directly in financial intelligence analysis and investigative support.
FinCEN personnel has fluctuated over time. For example, at the end 2008 there were 298 FTEs and by end 2010 there were 322, (with the Analysis & Liaison Unit staffed with 98 (2008) & 74 (2010). Staffing rose to 340 people in November 2013, but by May 2018 actual staffing was at 286 with a target of 340 staff budgeted, but with a 12% attrition rate and time taken (up to a year) to onboard new staff, including completing security clearances. Of these actual staff, 74 were in the Intelligence Unit, (with other roles being 60 in Liaison, 40 in Enforcement, 34 in Management, 28 in Technology, 22 in Policy, 16 in the Director’s Office and 12 in Legal.
In March 2022, President Biden proposed increasing FinCEN’s budget to US$210 million (up US$$49 million on 2022 budget) to bolster its oversight of the financial sector, increase corporate transparency, and provide financial intelligence to law enforcement. The unit has been tasked with building a complex corporate ownership registry & implementing a new AML whistleblower program among other things. The budget increase also will enable it to increase staffing in the coming fiscal year by more than 47% to an estimated 420 people, according to the budget plan. The agency had 269 full-time employees in fiscal year 2021. Congress had approved a US$161 million budget for FinCEN for 2022, about $29 million short of the $191 million that was requested.
FinCEN can be compared to other country’s FIUs, for example Japan has approx 100 personnel in its FIU, (432K STRs), Tracfin in France had 196 staff in 2020 (11,671 STRs); Germany 475 (400 operational & 114,914 STRs); New Zealand has 32 staff (12,900 SARs); Italy has 152 staff (109,000 SARs); UK had 120 staff in 2020 (573,000 SARs); India 58 staff (602,057 STRs); Spain 79 staff (5,000 SARs); and Ireland 11 staff (24,000 SARs).
Australia’s Austrac is similar to FinCEN, in that it is also a regulator and an FIU. In total, for all its operations, it has 378 staff and receives 264,000 SMRs.
The Russian FIU is the worlds largest with 800 personnel, though it receives up to 30 million reports, of which 17 million are STRs. The Head also has a direct reporting line to the Russian President, access to all information throughout the Russian government and authority to direct law enforcement resources to go after those targeted. Fore more details see the Russian Threat Assessment 2022.
For more details to compare FIUs and threats and responses more broadly see the Threat Assessments for Japan, France, Australia, Germany, New Zealand, Italy, UK, India, and Russia for more details, plus Austria, the Netherlands, Saudi Arabia, Hong Kong, & Ireland.
11. US ILLICIT FINANCE STRATEGY
There is no shortage of detailed US strategies to combat illicit finance & its component parts, many of which are very recent and have been announced by the Biden Administration. These include specific strategies targeting corruption, drugs, organised crime, proliferation and proliferation finance, international and domestic terrorism and terrorism finance, wildlife trafficking, fraud, cyber crime and cybersecurity, human trafficking and human smuggling.
Nevertheless, the overarching Illicit Financing Strategy was published in May 2022 with the overall goal being, “to encourage continued efforts to modernise the U.S. AML/CFT regime so that the public and private sectors can effectively focus resources against the most significant illicit finance risks”, and that “to combat this illicit finance activity, the United States must start at home and maintain an up-to-date AML/ CFT legal and operational framework and continue to lead globally on combating illicit finance. This will require the United States to address both persistent and emerging illicit finance challenges and risks. These key challenges and risks are:
- “Weak or non-existent reporting and disclosure requirements for company formation and non-financed real estate transactions;
- The lack of comprehensive AML/CFT requirements or under-resourced supervision of certain financial entities and intermediaries;
- Weaknesses in foreign AML/CFT regulatory frameworks for virtual assets and other risk areas and supervision of foreign financial institutions more broadly,
- Occasional AML/CFT compliances deficiencies at U.S. financial institutions; &
- Challenges in detecting and seizing illicit proceeds transferred in cash and identifying complicit merchants and professionals facilitating illicit finance
To achieve the goals, the 2022 Illicit Financing Strategy identifies four priorities:
- Close legal and regulatory gaps in the US AML/CFT framework;
- Continue to make the US AML/CFT regulatory framework for financial institutions more efficient and effective;
- Enhance the operational effectiveness of law enforcement & other U.S. government agencies in combating illicit finance; and
- Enable the benefits of technological innovation while mitigating risks.
This strategy follows the Biden’s Administration’s redoubled emphasis on anti-corruption as a national security priority via the issuance of a US Strategy on Countering Corruption, in December 2021, which includes curbing illicit finance as one key pillar, as well as addressing, “deficiencies in the US AML regime, (including by effectively collecting beneficial ownership information on those who control anonymous shell companies, and by increasing transparency in real estate transactions)”, & “holding corrupt actors accountable” as a second pillar.
With the passing of the Corporate Transparency Act 2020, and proposals moving ahead in US Congress on Professional “Enablers“, the US is finally addressing longstanding weaknesses in its AML/CTF defences, including those identified by FATF (which the US helped author and was committed to over 20 years ago).
For an OPED (Opinion & Editorial) on the USA fight against Financial Crime based on the research and analysis carried out in this comprehensive Threat Assessment 2022 by FCN including more on the numerous US refreshed and new Strategies See: HERE.
The FCN USA Financial Crime Threat Assessment is packed full of information for all financial crime fighters. For more details download the USA Financial Crime Dashboard by clicking HERE:
For an OPED (Opinion & Editorial) on the USA fight against Financial Crime based on the research and analysis carried out in this comprehensive Threat Assessment 2022 by FCN including more on the numerous US refreshed and new Strategies See: HERE.
For an analysis of whether the US should be considered as a High Risk Country See: HERE.
Financial Crime News – August 2022
USA Country Financial Crime Ratings – Threats & Responses
FCN US Country Score – Based on 26 Component Parts – Threats/Responses & Risks
US FI’s Risk Assessment’s
US FI’s require detailed threat information in order to carry out an effective Financial Crime Risk Assessment. These materials are the most comprehensive available and are available to use for FI’s with the consent of FCN/Metriqa Limited. To find out more including accessing the detailed mapping of threats to US National Priorities and to isolate and identify customer, products and services, channels and countries, to generate an up to date and state of the art risk assessment contact FCN/Metriqa Limited.
These materials are subject to copyright which is owned by Metriqa limited/Financial Crime News. These materials should not be used for commercial purposes without a license. Please contact the Editor for license to use.